Gordon’s Plants has the following partial income statement for 2009:
a. If Gordon’s has no preferred stock, what is its financial break-even point?

Earnings before interest and taxes.............................................. $4,500
Interest............................................................................................. ( 2,000)
Earnings before taxes..................................................................... $2,500
Taxes (40%)...................................................................................... ( 1,000)
Net income....................................................................................... $1,500
Number of common shares............................................................. 1,000

Show that the amount you come up with actually is the financial break-even by re-creating the portion of the income statement shown here for that amount.
b. What is the degree of financial leverage for Gordon’s? What does this value mean?
c. If Gordon’s actually has preferred stock that requires payment of dividends equal to $600, what would be the financial break-even point? Show that the amount you compute is the financial break-even by re-creating the portion of the income statement shown here for that amount. What is the degree of financial leverage in this case?